Superstorm Sandy’s Cost Economy UpTo $50 billion
NEW YORK (CNNMoney) — The estimated loss to the nation’s economy from Superstorm Sandy has climbed to as much as $50 billion, making it one of the nation’s most costly disasters.
Eqecat, which does loss estimates from catastrophes for the insurance industry, puts the total losses at between $30 billion and $50 billion. Its initial estimated loss earlier in the week was only $10 billion to $20 billion.
Eqecat said the higher estimate is due primarily to the large electric and utility losses, coupled with the transit and road closures that shut many businesses longer than expected. It also said further information about damage is raising the estimate.
It now believes the insured portion of the loss could reach in the $10 billion to $20 billion range, up from its earlier estimate of a $5 billion to $10 billion in insured losses.
Moody’s Analytics, a economic research firm, puts storm losses at $49.9 billion. About $30 billion of the loss comes from the physical storm damage, split fairly evenly between households, businesses, and public infrastructure such as rail lines, roads and water and sewage systems. The rest of the Moody’s estimate comes from lost business activity.
Mark Zandi, chief economist for Moody’s Analytics, said if he had to guess, he would estimate that the loss estimate is more likely to rise as the full extent of damage and the actual cost of repairs becomes better known.
“The property damages are typically revised up, and economic damages are revised down because businesses find a way to make the business back,” he said. “But a lot of estimates come from estimates about when power is restored. If that takes longer than estimated, it could be more costly.”
About 60% of the lost business output is likely to come from New Jersey, dwarfing the 15% from New York City and 14% from Philadelphia. The remaining lost ouput is from the Washington, D.C., area.
Moody’s estimates Sandy will be the third most costly U.S. natural disaster, trailing only the $157 billion total economic loss from 2005’s Hurricane Katrina and the $54.5 billion loss from 1992’s Hurricane Andrew when those losses are adjusted for inflation.
This is the second most costly hit to the affected area, trailing only the Sept. 11 terrorist attack. That caused $99 billion in damages nationwide, with most concentrated in New York. It is much greater than last year’s Hurricane Irene, which followed a similar track and caused about $12.6 billion in total economic losses.
The greatest amount of lost business in Moody’s estimate is $7 billion from financial services. Zandi said the two-day shutdown in the nation’s stock exchanges was particularly costly in terms of lost commissions and fees, since traders are not going to trade a share of stock twice just to make up for not being able to trade it during the shutdown. “That’s hard to get back,” he said.
Business and professional services, which include everything from high-priced legal and accounting services to messenger services, is the second biggest source of lost business, with an estimated $4.6 billon loss.
Zandi said the lost business estimates do not take into account the cost of the extra time residents of the area are having to spend dealing with the problems caused by the storm, such as long commutes, waiting in long lines for gasoline or even lost productivity at work due to increased fatigue.
“There’s so many ways it weighs on the economy that can’t be measured,” he said.
Despite the size of the loss, Zandi said the drag on the economy will be temporary, with rebuilding and recovery activity quickly making up for much of the economic damage from the storm. He believes any minor slowdown in the nation’s gross domestic product in the fourth quarter due to Sandy will be recouped early in 2013.
By Chris Isidore
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